10-Q

---

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ForQuarterly Period Ended June 30, 2021

or

☐ TRANSITION

REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For

the transition period from __________ to __________

---

Commission

File Number 000-54239

Digipath,Inc.

(Exact name of registrant issuer as specified in its charter)

Nevada	27-3601979
(State<br> or other jurisdiction of<br><br> <br>incorporation<br> or organization)	(I.R.S.<br> Employer<br><br> <br>Identification<br> No.)
6450 Cameron St Suite 113 Las Vegas, NV	89118
---	---
(Address<br> of principal executive offices)	(zip<br> code)

(702)527-2060

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒                                                  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒                                                  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large<br> accelerated filer	☐	Accelerated<br> filer	☐
Non-accelerated<br> filer	☒	Smaller<br> reporting company	☒
		Emerging<br> growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐                                                  No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

The

number of shares of registrant’s common stock outstanding as of August 13, 2021 was 71,230,153.

TABLE

OF CONTENTS

		Page
		No.
PART I - FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL<br>STATEMENTS (Unaudited)	3
	Condensed<br>Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and September 30, 2020	3
	Condensed<br>Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2021 and 2020 (Unaudited)	4
	Consolidated<br>Statements of Stockholders’ Equity (Deficit) for the Three and Nine Months Ended June 30, 2021 and 2020 (Unaudited)	5
	Condensed<br>Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2021 and 2020 (Unaudited)	6
	Notes<br>to the Condensed Consolidated Financial Statements (Unaudited)	7
ITEM 2.	MANAGEMENT’S<br>DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3.	QUANTITATIVE<br>AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26
ITEM 4.	CONTROLS<br>AND PROCEDURES	27
PART II - OTHER INFORMATION		28
ITEM 1.	Legal<br>Proceedings	28
ITEM 1A.	RISK<br>FACTORS	28
ITEM 2.	UNREGISTERED<br>SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	28
ITEM 3.	DEFAULTS<br>UPON SENIOR SECURITIES	28
ITEM 4.	MINE<br>SAFETY DISCLOSURES	28
ITEM 5.	OTHER<br>INFORMATION	28
ITEM 6.	EXHIBITS	28
	SIGNATURES	30

| 2 |

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PART

I – FINANCIAL INFORMATION

ITEM

1. FINANCIAL STATEMENTS.

DIGIPATH,

INC. AND SUBSIDIARIES

CONDENSED

CONSOLIDATED BALANCE SHEETS

			September<br> 30,
			2020
Assets
Current assets:
Cash	72,809		$	82,749
Accounts<br> receivable, net	193,810			242,145
Other current<br> assets	68,950			53,673
Deposits	73,675			18,675
Total current<br> assets	409,244			397,242
Right-of-use asset	437,298			505,706
Fixed assets, net	650,721			885,405
Total Assets	1,497,263		$	1,788,353
Liabilities<br> and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts<br> payable	340,492		$	387,946
Accrued<br> expenses	194,944			163,152
Short term<br> advances	115,112			50,112
Current<br> portion of operating lease liabilities	91,311			84,731
Current<br> portion of finance lease liabilities	28,468			32,532
Current<br> maturities of notes payable	56,705			54,317
Total current<br> liabilities	827,032			772,790
Non-current liabilities:
Operating<br> lease liabilities	354,701			423,752
Finance<br> lease liabilities	-			20,379
Notes payable	335,960			418,907
Convertible<br> notes payable, net of discounts of -0-<br> and 8,322<br> at June 30, 2021 and September 30, 2020, respectively	1,160,000			1,241,678
Total non-current<br> liabilities	1,850,661			2,104,716
Total Liabilities	2,677,693			2,877,506
Stockholders’ Equity<br> (Deficit):
Series A convertible<br> preferred stock, 0.001 par value, 10,000,000 shares<br> authorized; 1,325,942 shares issued and outstanding	1,326			1,326
Common stock, 0.001 par value, 250,000,000 shares authorized; 69,730,153 and 58,270,567 shares issued and outstanding at June 30, 2021 and September 30, 2020, respectively	69,730			58,271
Additional<br> paid-in capital	16,563,314			16,116,400
Accumulated<br> (deficit)	(17,814,800	)		(17,265,150	)
Total Stockholders’<br> Equity (Deficit)	(1,180,430	)		(1,089,153	)
Total Liabilities and Stockholders’<br> Equity (Deficit)	1,497,263		$	1,788,353

All values are in US Dollars.

See

accompanying notes to financial statements.

| 3 |

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DIGIPATH,

INC. AND SUBSIDIARIES

CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

---

	2021			2020			2021			2020
	For<br> the Three Months Ended						For<br> the Nine Months Ended
	June<br> 30,						June<br> 30,
	2021			2020			2021			2020
Revenues	$	764,015		$	407,229		$	1,897,560		$	1,971,141
Cost of sales		551,976			347,724			1,389,776			1,250,234
Gross profit		212,039			59,505			507,784			720,907
Operating expenses:
General<br> and administrative		278,082			328,128			715,093			1,123,479
Professional<br> fees		91,001			177,835			313,364			688,902
Change<br> in allowance for doubtful accounts		(10,960	)		25,420			(28,945	)		186,540
Total operating<br> expenses		358,123			531,383			999,512			1,998,921
Operating loss		(146,084	)		(471,878	)		(491,728	)		(1,278,014	)
Other income (expense):
Other income		-			21,000			47,918			63,000
Loss on<br> disposal of fixed assets		-			(28,238	)		-			(28,238	)
Interest<br> expense		(31,130	)		(41,571	)		(105,840	)		(107,005	)
Total other<br> income (expense)		(31,130	)		(48,809	)		(57,922	)		(72,243	)
Net loss	$	(177,214	)	$	(520,687	)	$	(549,650	)	$	(1,350,257	)
Weighted<br> average number of common shares outstanding - basic and fully diluted		68,479,201			57,225,309			64,081,692			52,048,121
Net loss<br> per share - basic and fully diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.03	)

See

accompanying notes to financial statements.

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DIGIPATH,

INC. AND SUBSIDIARIES

CONSOLIDATED

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

	Shares		Amount		Shares		Amount		Capital		Payable			(Deficit)			(Deficit)
	For<br> the Three Months Ended June 30, 2020
	Series A Convertible								Additional								Total<br> Stockholders’
	Preferred<br> Stock				Common<br> Stock				Paid-in		Subscriptions			Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable			(Deficit)			(Deficit)
Balance, March 31, 2020		1,325,942	$	1,326		56,737,672	$	56,738	$	15,879,225	$	37,500		$	(15,785,230	)	$	189,559
Common stock sold for cash
Common stock sold for cash, shares
Common stock issued for acquisition of VSSL Enterprises, Ltd.
Common stock issued for acquisition of VSSL Enterprises, Ltd., shares
Common stock issued for debt conversions
Common stock issued for debt conversions, shares
Common<br> stock issued for services		-		-		875,000		875		97,318		(37,500	)		-			60,693
Common stock issued for services, related parties
Common stock issued for services, related parties, shares
Common<br> stock options issued for services		-		-		-		-		28,032		-			-			28,032
Common stock warrants issued for services
Net loss for the three months<br> ended June 30, 2020		-		-		-		-		-		-			(520,687	)		(520,687	)
Balance, June 30, 2020		1,325,942	$	1,326		57,612,672	$	57,613	$	16,004,575	$	-		$	(16,305,917	)	$	(242,403	)
	For<br> the Three Months Ended June 30, 2021
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Series A Convertible								Additional							Total Stockholders’
	Preferred<br> Stock				Common<br> Stock				Paid-in		Subscriptions		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable		(Deficit)			(Deficit)
Balance, March 31, 2021		1,325,942	$	1,326		68,181,820	$	68,182	$	16,457,720	$	-	$	(17,637,586	)	$	(1,110,358	)
Common<br> stock issued for services		-		-		83,333		83		4,917		-		-			5,000
Common<br> stock issued for services, related parties		-		-		1,465,000		1,465		78,035		-		-			79,500
Common<br> stock options issued for services		-		-		-		-		22,642		-		-			22,642
Net income for the three<br> months ended June 30, 2021		-		-		-		-		-		-		(177,214	)		(177,214	)
Balance, June 30, 2021		1,325,942	$	1,326		69,730,153	$	69,730	$	16,563,314	$	-	$	(17,814,800	)	$	(1,180,430	)
	For<br> the Nine Months Ended June 30, 2020
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Series A Convertible								Additional							Total Stockholders’
	Preferred<br> Stock				Common<br> Stock				Paid-in		Subscriptions		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable		(Deficit)			(Deficit)
Balance, September 30, 2019		1,325,942	$	1,326		48,361,433	$	48,361	$	15,331,839	$	-	$	(14,955,660	)	$	425,866
Common<br> stock sold for cash		-		-		706,250		706		55,794		-		-			56,500
Common<br> stock issued for acquisition of VSSL Enterprises, Ltd.		-		-		6,500,000		6,500		367,250		-		-			373,750
Common<br> stock issued for services		-		-		2,044,989		2,046		113,360		-		-			115,406
Common<br> stock options issued for services		-		-		-		-		66,320		-		-			66,320
Common<br> stock warrants issued for services		-		-		-		-		70,012		-		-			70,012
Net loss for the nine months<br> ended June 30, 2020		-		-		-		-		-		-		(1,350,257	)		(1,350,257	)
Balance, June 30, 2020		1,325,942	$	1,326		57,612,672	$	57,613	$	16,004,575	$	-	$	(16,305,917	)	$	(242,403	)
	For<br> the Nine Months Ended June 30, 2021
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Series A Convertible								Additional							Total Stockholders’
	Preferred<br> Stock				Common<br> Stock				Paid-in		Subscriptions		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Payable		(Deficit)			(Deficit)
Balance, September 30, 2020		1,325,942	$	1,326		58,270,567	$	58,271	$	16,116,400	$	-	$	(17,265,150	)	$	(1,089,153	)
Common<br> stock sold for cash		-		-		900,000		900		19,350		-		-			20,250
Common<br> stock issued for debt conversions		-		-		6,666,668		6,666		193,334		-		-			200,000
Common<br> stock issued for services		-		-		833,333		833		30,242		-		-			31,075
Common<br> stock issued for services, related parties		-		-		3,059,585		3,060		140,220		-		-			143,280
Common<br> stock options issued for services		-		-		-		-		63,768		-		-			63,768
Net loss for the nine months<br> ended June 30, 2021		-		-		-		-		-		-		(549,650	)		(549,650	)
Net income (loss)		-		-		-		-		-		-		(549,650	)		(549,650	)
Balance, June 30, 2021		1,325,942	$	1,326		69,730,153	$	69,730	$	16,563,314	$	-	$	(17,814,800	)	$	(1,180,430	)

See

accompanying notes to financial statements.

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DIGIPATH,

INC. AND SUBSIDIARIES

CONDENSED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2021			2020
	For<br> the Nine Months Ended
	June<br> 30,
	2021			2020
Cash flows from operating<br> activities
Net loss	$	(549,650	)	$	(1,350,257	)
Adjustments to reconcile net<br> loss to net cash used in operating activities:
Change<br> in allowance for doubtful accounts		(28,945	)		186,540
Depreciation<br> and amortization expense		233,663			242,207
Loss on<br> disposal of fixed assets		2,227			28,238
Gain on<br> early extinguishment of debt		(40,338	)		-
Stock issued<br> for services		174,355			115,406
Options<br> and warrants granted for services		63,768			136,332
Amortization<br> of debt discounts		8,322			24,783
Decrease<br> (increase) in assets:
Accounts<br> receivable		77,280			(176,825	)
Other current<br> assets		(15,277	)		(42,815	)
Inventory		-			(37,900	)
Deposits		(55,000	)		26,057
Right-of-use<br> assets		68,408			144,149
Increase<br> (decrease) in liabilities:
Accounts<br> payable		(47,454	)		230,483
Accrued<br> expenses		32,016			169
Lease liabilities		(62,471	)		(141,504	)
Net cash used in operating<br> activities		(139,096	)		(614,937	)
Cash flows<br> from investing activities
Cash acquired<br> from affiliate in acquisition of VSSL		-			143
Cash paid<br> for purchase of VSSL Enterprises, Ltd.		-			(200,000	)
Purchase<br> of fixed assets		(1,206	)		(141,151	)
Net cash used in investing<br> activities		(1,206	)		(341,008	)
Cash flows<br> from financing activities
Proceeds<br> from short term advances		65,000			25,000
Repayments<br> of short term advances		-			(25,000	)
Principal<br> payments on finance lease		(24,443	)		(41,824	)
Principal<br> payments on note payable, equipment financing		(40,445	)		(25,642	)
Proceeds<br> from notes payable		-			220,034
Proceeds<br> from convertible notes		110,000			550,000
Proceeds<br> from sale of common stock		20,250			56,500
Net cash provided by financing<br> activities		130,362			759,068
Net decrease in cash		(9,940	)		(196,877	)
Cash -<br> beginning		82,749			323,739
Cash - ending	$	72,809		$	126,862
Supplemental disclosures:
Interest<br> paid	$	49,508		$	35,869
Income<br> taxes paid	$	-		$	-
Non-cash investing and financing<br> activities:
Fair value<br> of net assets acquired from affiliate in business combination	$	-		$	18,871
Fair value<br> of common stock paid to affiliate in business combination	$	-		$	373,750
Fixed assets<br> acquired with capitalized finance lease	$	-		$	99,193
Fixed assets<br> acquired with note payable, equipment financing	$	-		$	291,931
Fair value<br> of common shares issued for conversion of debt		200,000			-

See

accompanying notes to financial statements.

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DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

---

Note1 – Organization, Basis of Presentation and Significant Accounting Policies

Organization

Digipath, Inc. was incorporated in Nevada on October 5, 2010. Digipath, Inc. and its subsidiaries (“Digipath,” the “Company,” “we,” “our” or “us”) is a service-oriented independent testing laboratory, data analytics and media firm focused on the developing cannabis and hemp markets, and supports the cannabis industry’s best practices for reliable testing, cannabis education and training. Our mission is to provide pharmaceutical-grade analysis and testing to the cannabis industry, under ISO-17025:2017 guidelines, to ensure consumers and patients know exactly what is in the cannabis they ingest and to help maximize the quality of our clients’ products through research, development, and standardization. Digipath has been operating a cannabis-testing lab in Nevada since 2015 and hopes to open labs in other states that have legalized the sale of cannabis, beginning with California or Arizona.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Intercompany accounts and transactions have been eliminated.

The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report on Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. Such adjustments are of a normal, recurring nature. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with GAAP and do not contain certain information included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at June 30, 2021:

Schedule of Entities Under Common Control and Ownership

	Jurisdiction<br> of
Name<br> of Entity^(1)^	Incorporation	Relationship
Digipath, Inc.^(2)^	Nevada	Parent
Digipath Labs, Inc.	Nevada	Subsidiary
Digipath Labs CA, Inc.^(3)^	California	Subsidiary
Digipath Labs S.A.S.^(4)^	Colombia	Subsidiary
VSSL Enterprises, Ltd.^(5)^	Canada	Subsidiary
TNM News Corp.^(6)^	Nevada	Subsidiary
^(1)^	All entities are<br>in the form of a corporation.
---	---
^(2)^	Holding company,<br>which owns each of the wholly-owned subsidiaries. All subsidiaries shown above are wholly-owned by Digipath, Inc., the parent company.
---	---
^(3)^	Formed during the<br>second fiscal quarter of 2021, but has not yet commenced significant operations.
---	---
^(4)^	Formed during the<br>first fiscal quarter of 2019, but has not yet commenced significant operations.
---	---
^(5)^	Acquired on March<br>11, 2020.
---	---
^(6)^	Minimal activity,<br>dissolved on July 28, 2021.
---	---

The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. All significant inter-company transactions have been eliminated in the preparation of these financial statements. The parent company and subsidiaries will be collectively referred to herein as the “Company”, “Digipath” or “DIGP”. The Company’s headquarters are located in Las Vegas, Nevada and substantially all of its customers are within the United States.

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.

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DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Segment Reporting

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of lab testing services through our subsidiary Digipath Labs, Inc.

Revenue is primarily generated through our subsidiary, Digipath Labs, Inc., which recognizes revenue from the analytical testing of cannabis products for licensed producers and cultivators within the state of Nevada on a determinable fixed fee per test, or panel of tests basis. Revenue from the performance of those services is recognized upon completion of the tests, at which time test results are delivered to the customer, provided collectability of the fee is reasonably assured. We typically require payment within thirty days of the delivery of results. Management estimates an allowance for doubtful accounts based on the aging of its receivables.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 (ASC 2018-07). All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

Adoption of New Accounting Standards and Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

In August 2020, the FASB issued Accounting Standard Update (“ASU”) No. 2020-06, Debt–Debt with Conversion and OtherOptions (Subtopic 470-20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40): Accountingfor Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if converted method. The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2021, with early adoption permitted. The adoption of ASU 2020-06 is not expected to have a material impact on the Company’s financial statements or related disclosures.

In November 2019, the FASB issued ASU 2019-12 – Income Taxes (“Topic 740”): Simplifying the Accountingfor Income Taxes. The amendments in ASU 2019-12 are part of an initiative to reduce complexity in accounting standards and simplify the accounting for income taxes by removing certain exceptions from Topic 740 and making minor improvements to the codification. ASU 2019-12 and its related amendments are effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020*.* The provisions of this update did not have a material impact on the Company’s financial position or results of operations.

No other new accounting pronouncements, issued or effective during the period ended June 30, 2021, have had or are expected to have a significant impact on the Company’s financial statements.

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DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Note2 – Going Concern

As shown in the accompanying condensed consolidated financial statements,

as of June 30, 2021, the Company had negative working capital of $417,788, accumulated recurring losses of $17,814,800, and only $72,809 of cash on hand, which is not sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new customers to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving profitability.

The consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. These financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note3 – Related Party Transactions

Board of Directors Compensation

On March 25, 2021, the Board of Directors approved changes to the compensation arrangements for each of Edmond A. DeFrank and Dennis Hartmann for serving as directors of the Company, as follows:

●	Effective<br> April 1, 2021, annual compensation is increased from $18,000 to $30,000, payable in quarterly<br> installments of $7,500 each; and
●	Such<br> compensation may now be paid in shares of common stock of the Company instead of cash, at<br> the discretion of the Company.
---	---

In connection with the foregoing, the Board of Directors of the Company also approved changes to the compensation arrangements for Bruce Raben for serving as the Company’s Chairman of the Board, as follows:

●	Effective<br> April 1, 2021, annual compensation has been increased from $30,000 to $60,000, payable in<br> quarterly installments of $15,000 each; and
●	Such<br> compensation may now be paid in shares of common stock of the Company instead of cash, at<br> the discretion of the Company.
---	---

Common Stock Sold for Cash

On

December 30, 2020, the Company sold 900,000 shares of its common stock to its Chairman of the Board in exchange for proceeds of $20,250.

Common Stock Issued for Services

On

June 25, 2021, the Company issued 250,000 shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On June 25, 2021, the Board approved the issuance of 250,000 shares of

common stock to Bruce Raben for services rendered. The fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On June 25, 2021, the Board approved the issuance of 125,000 shares of

common stock to Dennis Hartmann for services rendered. The fair value of the common stock was $7,500 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On June 25, 2021, the Board approved the issuance of 83,333 shares of common

stock to Edmond A. DeFrank for services rendered. The fair value of the common stock was $5,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On June 2, 2021, the Board approved the issuance of 840,000 shares of common

stock to Bruce Raben for services rendered. The fair value of the common stock was $42,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

| 9 |

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DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

On

March 25, 2021, the Company issued 266,430 shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The aggregate fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On

March 25, 2021, the Board also approved the issuance of 200,000 shares of common stock as a bonus to each of Edmond A. DeFrank, Dennis Hartmann and Bruce Raben, or 600,000 shares in the aggregate. The aggregate fair value of the common stock was $33,780 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On

December 25, 2020, the Company issued 728,155 shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The aggregate fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

Note4 – Fair Value of Financial Instruments

The Company discloses the fair value of certain assets and liabilities in accordance with ASC 820 – Fair Value Measurement (“ASC 820”). Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

| 10 |

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DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2021 and September 30, 2020, respectively:

Summary of Financial Instruments at Fair Value on Recurring Basis

	Level<br> 1		Level<br> 2			Level<br> 3
	Fair<br> Value Measurements at June 30, 2021
	Level<br> 1		Level<br> 2			Level<br> 3
Assets
Cash	$	72,809	$	-		$	-
Total<br> assets		72,809		-			-
Liabilities
Short term advances		-		115,112			-
Lease liabilities		-		-			474,480
Notes payable		-		392,665			-
Convertible notes payable		-		-			1,160,000
Total<br> liabilities		-		507,777			1,634,480
Total	$	72,809	$	(507,777	)	$	(1,634,480	)
		Level<br> 2			Level<br> 3
---	---	---	---	---	---	---	---
		Level<br> 2			Level<br> 3
Assets
Cash	82,749	$	-		$	-
Total<br> assets	82,749		-			-
Liabilities
Short term advances	-		50,112			-
Lease liabilities	-		-			561,394
Notes payable	-		473,224			-
Convertible notes payable,<br> net of discounts of 8,322	-		-			1,241,678
Convertible notes payable	-		-			1,241,678
Total<br> liabilities	-		523,336			1,803,072
Total	82,749	$	(523,336	)	$	(1,803,072	)

All values are in US Dollars.

The fair value of our intellectual properties are deemed to approximate book value, and are considered Level 3 inputs as defined by ASC Topic 820-10-35.

Level

3 liabilities consist of lease liabilities and a total of $1,160,000 of convertible debentures and $1,250,000 of convertible debentures, net of discounts of $-0- and $8,322, as of June 30, 2021 and September 30, 2020, respectively.

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended June 30, 2021 or the year ended September 30, 2020.

Note5 – Accounts Receivable

Accounts

receivable was $193,810 and $242,145 at June 30, 2021 and September 30, 2020, respectively, net of allowance for uncollectible accounts of $96,282 and $128,944 at June 30, 2021 and September 30, 2020, respectively.

Note6 – Other Current Assets

Other current assets consist of the following:

Schedule of Other Current Assets

	June 30,		September 30,
	2021		2020
Prepaid expenses	$	63,470	$	48,151
Other receivable		5,480		5,522
Total<br> other current assets	$	68,950	$	53,673

| 11 |

| --- |

DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Note7 – Fixed Assets

Fixed assets consist of the following at June 30, 2021 and September 30, 2020:

Schedule of Fixed Assets

	June 30,			September 30,
	2021			2020
Software	$	125,903		$	124,697
Office equipment		71,601			74,777
Furniture and fixtures		29,879			29,879
Lab equipment		1,398,716			1,398,716
Leasehold improvements		494,117			494,117
Lab equipment held under capital<br> leases		99,193			99,193
Fixed assets, gross		2,219,409			2,221,379
Less: accumulated depreciation		(1,568,688	)		(1,335,974	)
Total	$	650,721		$	885,405

On

March 31, 2021, we distributed fixed assets with an aggregate net book value of $2,227 to our former CEO in satisfaction of accrued payroll that was owed. The fixed assets consisted of office equipment with a historical cost basis of $3,176 and accumulated depreciation of $949, resulting in a loss of $2,227 that was settled against the amount of unpaid compensation that was owed.

Depreciation

and amortization expense totaled $233,663 and $242,207 for the nine months ended June 30, 2021 and 2020, respectively.

Note8 – Leases

The Company leases its operating and office facility under a non-cancelable real property lease agreement that expires on August 31, 2025. The Company also has a financing lease for lab equipment subject to the recently adopted ASU 2016-02. In the locations in which it is economically feasible to continue to operate, management expects to enter into a new lease upon expiration. The real property lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The components of lease expense were as follows:

Schedule of Components of Lease Expense

	For the Nine
	Months Ended
	June 30,
	2021
Finance lease<br> cost	$	6,477
Operating lease cost:
Amortization<br> of assets		68,408
Interest<br> on lease liabilities		20,747
Total<br> lease cost	$	95,632

| 12 |

| --- |

DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Supplemental balance sheet information related to leases was as follows:

Schedule of Supplemental Balance Sheet Information

	June 30,
	2021
Operating<br> leases:
Operating<br> lease assets	$	437,298
Current<br> portion of operating lease liabilities	$	91,311
Noncurrent<br> operating lease liabilities		354,701
Total<br> operating lease liabilities	$	446,012
Finance<br> lease:
Equipment,<br> at cost	$	99,193
Accumulated<br> amortization		(34,718	)
Equipment, net	$	64,475
Current portion of finance<br> lease liability	$	28,468
Noncurrent finance lease<br> liability		-
Total<br> finance lease liability	$	28,468
Weighted average remaining<br> lease term:
Operating<br> leases		4.17<br> years
Finance<br> leases		0.8<br> years
Weighted average discount<br> rate:
Operating<br> leases		5.75	%
Finance<br> lease		18.41	%

Supplemental cash flow and other information related to leases was as follows:

Schedule of Supplemental Cash Flow and Other Information

	For the Nine
	Months Ended
	June 30,
	2021
Cash paid for amounts included<br> in the measurement of lease liabilities:
Operating<br> cash flows used for operating leases	$	62,471
Financing<br> cash flows used for finance leases	$	24,443

Future minimum lease commitments on a fiscal year basis, including common area maintenance fees, under non-cancelable operating leases are as follows as of June 30, 2021:

Schedule of Future Minimum Annual Lease Commitments Under Operating Leases

Fiscal Year Ending	Minimum Lease
September<br> 30,	Commitments
2021 (for the<br> three months remaining)	$	28,566
2022		115,550
2023		119,468
2024		123,543
2025		116,891
Total minimum lease payments		504,018
Less interest		58,006
Present value of lease liabilities		446,012
Less current portion		91,311
Long-term lease liabilities	$	354,701

| 13 |

| --- |

DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Future minimum annual lease payments required under the finance lease and the present value of the net minimum lease payments are as follows at June 30, 2021:

Schedule of Future Minimum Annual Lease Payments Under Finance Lease

	Finance
	Leases
2021 (for the<br> three months remaining)	$	9,276
2022		21,644
Total<br> minimum lease payments		30,920
Less interest		2,452
Present<br> value of lease liabilities		28,468
Less current portion		28,468
Long-term<br> lease liabilities	$	-

Note9 – Short Term Advances

Short term advances consist of the following at June 30, 2021 and September 30, 2020, respectively:

Schedule of Short Term Advances

		September 30,
		2020
On April 29,<br> 2021, we received 25,000 as a short-term loan from one of our convertible noteholders. The loan bears interest at the rate of 8%<br> per annum.	25,000	$	-
On March 23, 2021, we received<br> 40,000 as a short-term loan from one of our convertible noteholders. The loan bears interest at the rate of 8% per annum.	40,000		-
On July 20, 2020, we received<br> 30,112 as a short-term loan from one of our convertible noteholders. The loan bears interest at the rate of 8% per annum.	30,112		30,112
On January 21, 2020, we<br> received 20,000 as a short-term loan from one of our convertible noteholders. No interest expense was recognized.	20,000		20,000
Total short term advances	115,112	$	50,112

All values are in US Dollars.

The

Company recorded interest expense pursuant to the stated interest rates on the short term loans in the amount of $3,123 for the nine months ended June 30, 2021.

| 14 |

| --- |

DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Note10 –Notes Payable

Notes payable consists of the following at June 30, 2021 and September 30, 2020, respectively:

Schedule of Notes Payable

			September 30,
			2020
On June 22,<br> 2020, the Company, borrowed 40,114 from Cross River Bank, pursuant to a Promissory Note issued by the Company to Cross River Bank<br> (the “Company PPP Note”). The loan was made pursuant to the Payroll Protection Program established as part of the Coronavirus<br> Aid, Relief, and Economic Security Act (the “Payroll Protection Program”). The Company PPP Note carried interest at 1.00%<br> per annum, payable monthly beginning December 22, 2020, and was due on June 22, 2025. On January 12, 2021, the PPP Note and interest<br> was forgiven, resulting in a gain on early extinguishment of debt in the amount of 40,338.	-		$	40,114
On May 13, 2020, the Company,<br> through its wholly-owned subsidiary Digipath Labs, Inc. (“Labs”), borrowed 179,920 from WebBank Corp, pursuant to a<br> Promissory Note issued by Labs to WebBank Corp (the “Labs PPP Note”). The loan was made pursuant to the Payroll Protection<br> Program. The Labs PPP Note bears interest at 1.00% per annum, payable monthly beginning December 13, 2020, and is due on May 13,<br> 2022. The Labs PPP Note may be repaid at any time without penalty.   Under the Payroll Protection Program, Labs will<br> be eligible for loan forgiveness up to the full amount of the Labs PPP Note and any accrued interest. The forgiveness amount will<br> be equal to the amount that Labs spends during the 8-week period beginning May 13, 2020 on payroll costs, payment of rent on any<br> leases in force prior to February 15, 2020 and payment on any utility for which service began before February 15, 2020. The maximum<br> amount of loan forgiveness for non-payroll expenses is 25% of the amount of the Labs PPP Note. On July 20, 2021, the PPP Note and<br> interest was forgiven, resulting in a gain on early extinguishment of debt in the amount of 182,054.	179,920			179,920
On December 26, 2019, the<br> Company financed the purchase of 377,124 of lab equipment, in part, with the proceeds of a bank loan in the amount of 291,931.<br> The loan bears interest at the rate of 5.75% per annum and requires monthly payments of 5,622 over the five-year term of the loan<br> ending on December 26, 2024. The Company’s obligations under this loan are secured by a lien on the purchased equipment.	212,745			253,190
Total notes payable	392,665			473,224
Less: current maturities	(56,705	)		(54,317	)
Notes payable	335,960		$	418,907

All values are in US Dollars.

The

Company recorded interest expense pursuant to the stated interest rate and closing costs on the notes payable in the amount of $11,609 and $12,153 during the nine months ended June 30, 2021 and 2020, respectively.

| 15 |

| --- |

DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Note11 – Convertible Notes Payable

Convertible notes payable consists of the following at June 30, 2021 and September 30, 2020, respectively:

Schedule of Convertible Notes Payable

		September 30,
		2020
On February<br> 11, 2020, the Company completed the sale to an accredited investor of a 9% Secured Convertible Promissory Note in the principal amount<br> of 50,000. The Note matures on August 11, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the<br> Company’s common stock at a conversion price of 0.15 per share. On December 28, 2020, the conversion price was amended to<br> 0.03 per share in exchange for an additional 10,000 of proceeds and the promissory note was increased to 60,000. The Company’s<br> obligations under the Note are secured by a lien on the assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc.,<br> pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the note holder<br> converted 10,000 of principal into 333,334 shares of common stock at a conversion price of 0.03 per share.	50,000	$	50,000
On February 11, 2020, the<br> Company completed the sale to an accredited investor of a 9% Secured Subordinated Convertible Promissory Note in the principal amount<br> of 150,000. The Note matures on August 11, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the<br> Company’s common stock at a conversion price of 0.15 per share. On December 28, 2020, the conversion price was amended to<br> 0.03 per share in exchange for an additional 50,000 of proceeds and the promissory note was increased to 200,000. The Company’s<br> obligations under the Note are secured by subordinated lien on the assets of the Company and its wholly-owned subsidiary Digipath<br> Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December 29, 2020, the<br> note holder converted 50,000 of principal into 1,666,667 shares of common stock at a conversion price of 0.03 per share.	150,000		150,000
On February 10, 2020, the<br> Company completed the sale to an accredited investor of a 9% Secured Convertible Promissory Note in the principal amount of 350,000.<br> The Note matures on August 10, 2022, bears interest at a rate of 9% per annum, and was convertible into shares of the Company’s<br> common stock at a conversion price of 0.15 per share. On December 28, 2020, the conversion price was amended to 0.03 per share<br> in exchange for an additional 50,000 of proceeds that were received on January 4, 2021, and the promissory note was increased to<br> 400,000. The Company’s obligations under the Note are secured by a lien on the assets of the Company and its wholly-owned<br> subsidiary Digipath Labs, Inc., pursuant to a Security Agreement between the Company, Digipath Labs, Inc. and the investor. On December<br> 29, 2020, the note holder converted 50,000 of principal into 1,666,667 shares of common stock at a conversion price of 0.03 per<br> share.	350,000		350,000
On September 23, 2019,<br> the Company received proceeds of 200,000 on a senior secured convertible note that carries an 8% interest rate, which matures on<br> August 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note<br> holder at a fixed conversion price of 0.11 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and<br> the conversion price was amended to 0.03 per share. The Company’s obligations under this Note are secured by a lien on the<br> assets of the Company and its wholly-owned subsidiary Digipath Labs, Inc. On February 22, 2021, the noteholder converted 90,000<br> of principal into 3,000,000 shares of common stock at a conversion price of 0.03 per share.	110,000		200,000
On November 8, 2018, the<br> Company received proceeds of 350,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August<br> 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder<br> at a fixed conversion price of 0.14 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the<br> conversion price was amended to 0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets<br> of the Company and its wholly-owned subsidiary Digipath Labs, Inc. A total of 4,066 of interest was repaid during the year ended<br> September 30, 2019.	350,000		350,000
On November 5, 2018, the<br> Company received proceeds of 150,000 on a senior secured convertible note that carries an 8% interest rate, which matures on August<br> 10, 2022, as amended. The principal and interest were convertible into shares of common stock at the discretion of the note holder<br> at a fixed conversion price of 0.14 per share. On September 30, 2020, the maturity date was extended to August 10, 2022 and the<br> conversion price was amended to 0.03 per share. The Company’s obligations under this Note are secured by a lien on the assets<br> of the Company and its wholly-owned subsidiary Digipath Labs, Inc.	150,000		150,000
Total convertible notes<br> payable	1,160,000		1,250,000
Less: unamortized debt<br> discounts	-		(8,322	)
	1,160,000		1,241,678
Less: current maturities	-		-
Convertible notes payable	1,160,000	$	1,241,678

All values are in US Dollars.

| 16 |

| --- |

DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

In addition, the Company recognized and measured the embedded beneficial conversion feature present in the convertible notes by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the convertible notes. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt.

The

aforementioned accounting treatment resulted in a total debt discount equal to $70,964. The discount is amortized on a straight-line basis from the dates of issuance until the earlier of the stated redemption date of the debts, as noted above or the actual settlement date. The Company recorded debt amortization expense on the aforementioned debt discount in the amount of $8,322 and $24,783 during the nine months ended June 30, 2021 and 2020, respectively.

All

of the convertible notes limit the maximum number of shares that can be owned by each note holder as a result of the conversions to common stock to 4.99% of the Company’s issued and outstanding shares.

The

Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $76,309 and $61,099 for the nine months ended June 30, 2021 and 2020, respectively.

The Company recognized interest expense for the nine months ended June 30, 2021 and 2020, respectively, as follows:

Schedule of Interest Expense

	June 30,		June 30,
	2021		2020
Interest on<br> short term loans	$	3,123	$	-
Interest on capital leases		6,477		8,970
Interest on notes payable		11,609		12,153
Amortization of beneficial<br> conversion features		8,322		24,783
Interest on convertible<br> notes		76,309		61,099
Total<br> interest expense	$	105,840	$	107,005

Note12 - Changes in Stockholders’ Equity

Convertible Preferred Stock

The

Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, of which 6,000,000 have been designated as Series A Convertible Preferred Stock (“Series A Preferred”), with the remaining 4,000,000 shares available for designation from time to time by the Board as set forth below. As of June 30, 2021, there were 1,325,942 shares of Series A Preferred issued and outstanding. The Board of Directors is authorized to determine any number of series into which the undesignated shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock. Each share of Series A Preferred is currently convertible into five shares of common stock.

The

conversion price is adjustable in the event of stock splits and other adjustments in the Company’s capitalization, and in the event of certain negative actions undertaken by the Company. At the current conversion price, the 1,325,942 shares of Series A Preferred outstanding at June 30, 2021 are convertible into 6,629,710 shares of the common stock of the Company. No holder is permitted to convert its shares of Series A Preferred if such conversion would cause the holder to beneficially own more than 4.99% of the issued and outstanding common stock of the Company immediately after such conversion, unless waived by such holder by providing at least sixty-five days’ notice.

Common Stock

Common

stock consists of $0.001 par value, 250,000,000 shares authorized, of which 69,730,153 shares were issued and outstanding as of June 30, 2021.

Common Stock Sales

On

December 30, 2020, the Company sold 900,000 shares of its common stock to its Chairman of the Board in exchange for proceeds of $20,250.

Debt Conversions

On February 22, 2021,

a convertible noteholder converted $90,000 of principal into 3,000,000 shares at a conversion

price of $0.03 per share. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

On December 29, 2020,

the three holders of the Company’s 9% Secured Convertible Notes converted debt in

the aggregate original principal amount of $110,000 into an aggregate of 3,666,668 shares at a conversion price of $0.03 per share.

The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

Common Stock Issued for Services, Related Parties

On

June 25, 2021, the Company issued 250,000 shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

| 17 |

| --- |

DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

On June 25, 2021, the Board approved the issuance

of 250,000 shares of common stock to Bruce Raben for services rendered. The fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On June 25, 2021, the Board approved the issuance

of 125,000 shares of common stock to Dennis Hartmann for services rendered. The fair value of the common stock was $7,500 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On June 25, 2021, the Board approved the issuance

of 83,333 shares of common stock to Edmond A. DeFrank for services rendered. The fair value of the common stock was $5,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On June 2, 2021, the Board approved the issuance of 840,000 shares of common

stock to Bruce Raben for services rendered. The fair value of the common stock was $42,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On

March 25, 2021, the Company issued 266,430 shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On March 25, 2021, the Board approved the issuance of 200,000 shares of

common stock as a bonus to each of Edmond A. DeFrank, Dennis Hartmann and Bruce Raben, or 600,000 shares in the aggregate. The aggregate fair value of the common stock was $33,780 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On

December 25, 2020, the Company issued 728,155 shares of common stock to its former CFO for services rendered pursuant to his employment agreement. The fair value of the common stock was $15,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

Common Stock Issued for Services

On

March 25, 2021, the Company issued 250,000 shares of common stock to a consultant as a bonus for services rendered. The aggregate fair value of the common stock was $14,075 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

On

December 28, 2020, the Company issued 500,000 shares of common stock to a consultant for services rendered pursuant to his consulting agreement. The aggregate fair value of the common stock was $12,000 based on the closing price of the Company’s common stock on the date of grant, and was expensed over the requisite service period.

Amortization of Stock-Based Compensation

A

total of $63,768 of stock-based compensation expense was recognized from the amortization of options and warrants over their vesting period during the nine months ended June 30, 2021.

Note13 – Common Stock Options

Stock Incentive Plan

On

June 21, 2016, we amended and restated our 2012 Stock Incentive Plan (the “2012 Plan”), which was originally adopted on March 5, 2012 and previously amended on May 20, 2014. As amended, the 2012 Plan provides for the issuance of up to 11,500,000 shares of common stock pursuant to the grant of options or other awards, including stock grants, to employees, officers or directors of, and consultants to, the Company and its subsidiaries. Options granted under the 2012 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options, and are exercisable over periods not exceeding ten years from date of grant.

A

total of 4,120,000 options were outstanding as of June 30, 2021. During the nine months ended June 30, 2021, options to purchase an aggregate total of 750,000 shares of common stock at a weighted average exercise price of $0.10 per share expired.

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DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Options Granted

On June 2, 2021, we granted to A. Stone Douglass, a consultant of ours at the time of grant, and currently our Chief Financial Officer, options to purchase 1,000,000 shares of the Company’s common stock, having an exercise price of $0.06 per share, exercisable over a ten-year term. The options vest as to one quarter on July 1, 2021, and quarterly over the next seven quarters as to the remaining shares, beginning on October 1, 2021. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 170% and a call option value of $0.0576, was $57,592, resulting in $14,398 of stock-based compensation expense during the nine months ended June 30, 2021.

On March 25, 2021, we granted options to an individual to purchase 300,000 shares of the Company’s common stock, having an exercise price of $0.06 per share, exercisable over a ten-year term. The options are fully vested. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 167% and a call option value of $0.0527, was $15,822, resulting in $15,822 of stock-based compensation expense during the nine months ended June 30, 2021.

Options Forfeited

On

December 30, 2020, a total of 750,000 options with a weighted average exercise price of $0.10 were forfeited.

Note14 – Common Stock Warrants

Warrants

to purchase a total of 2,868,335 shares of common stock were outstanding as of June 30, 2021.

During

the nine months ended June 30, 2021, warrants to purchase an aggregate total of 1,405,934 shares of common stock at a weighted average exercise price of $0.24 per share expired.

Note15 – Other Income (Expense)

Other income (expense) for the nine months ended June 30, 2021 and 2020 consisted of the following:

Schedule of Other Income (Expense)

	2021			2020
	June 30,
	2021			2020
Gain on early<br> extinguishment of debt	$	40,338		$	-
Settlement of accrued wages<br> owed to former CEO with distribution of assets		7,580			-
Rental income on subleases		-			63,000
Loss on disposal of fixed<br> assets		-			(28,238	)
Interest expense		(105,840	)		(107,005	)
Total<br>other income (expense)	$	(57,922	)	$	(72,243	)

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DIGIPATH,

INC. AND SUBSIDIARIES

Notes

to Condensed Consolidated Financial Statements

(Unaudited)

Note16 - Income Tax

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

For

the nine months ended June 30, 2021 and the year ended September 30, 2020, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At June 30, 2021, the Company had approximately $13,143,000 of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.

Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at June 30, 2021 and September 30, 2020, respectively.

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

Note17 – Subsequent Events

Termination of Equipment Purchase Agreement

On July 22, 2021, the Company elected to terminate its asset

purchase agreement with PharmaLabs San Diego. In addition to the $55,000 non-refundable deposit that was paid on April 30, 2021 in exchange for lab equipment that has not yet been delivered to us, we paid an additional $27,000 of extension and termination fees.

Common Stock Issued for Services

On July 1, 2021, the Company issued 1,500,000 shares of common

stock to Todd Denkin in conjunction with his appointment as the Company’s President. The aggregate fair value of the common stock was $81,900 based on the closing price of the Company’s common stock on the date of grant, and was expensed on the date of grant.

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ITEM

2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Theinformation contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the yearended September 30, 2020 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysisof Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion andanalysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in thisForm 10-Q.

Thefollowing discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of thePrivate Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation,“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guaranteesof future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-lookingstatements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. Westrongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended September 30,2020 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actualresults to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements containedin this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notesthereto that appear elsewhere in this report.

Overview

Digipath, Inc. was incorporated in Nevada on October 5, 2010. Digipath, Inc. and its subsidiaries (“Digipath,” the “Company,” “we,” “our” or “us”) supports the cannabis industry’s best practices for reliable testing, cannabis education and training. Our mission is to provide pharmaceutical-grade analysis and testing to the cannabis industry, under ISO-17025:2017 guidelines, to ensure consumers and patients know exactly what is in the cannabis they ingest and to help maximize the quality of our clients’ products through research, development, and standardization. Digipath has been operating a cannabis-testing lab in Nevada since 2015 and has plans to open labs in other states that have legalized the sale of cannabis, beginning with California.

Resultsof Operations for the Three Months Ended June 30, 2021 and 2020:

The following table summarizes selected items from the statement of operations for the three months ended June 30, 2021 and 2020.

	Three Months<br> Ended June 30,						Increase /
	2021			2020			(Decrease)
Revenues	$	764,015		$	407,229		$	356,786
Cost of sales		551,976			347,724			204,252
Gross<br> profit		212,039			59,505			152,534
Operating expenses:
General<br> and administrative		278,082			328,128			(50,046	)
Professional<br> fees		91,001			177,835			(86,834	)
Change<br> in allowance for doubtful accounts		(10,960	)		25,420			(36,380	)
Total<br> operating expenses:		358,123			531,383			(173,260	)
Operating income (loss)		(146,084	)		(471,878	)		(325,794	)
Total<br> other income (expense)		(31,130	)		(48,809	)		(17,679	)
Net loss	$	(177,214	)	$	(520,687	)	$	(343,473	)

Revenues

Aggregate revenues for the three months ended June 30, 2021 were $764,015, compared to revenues of $407,229 during the three months ended June 30, 2020, an increase of $356,786, or 88%. The increase in revenue was due to the increase in tourism in Nevada during the current period, in comparison to the prior year period in which Nevada tourism was significantly depressed because of the COVID-19 coronavirus pandemic.

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Costof Sales

Cost of sales for the three months ended June 30, 2021 were $551,976, compared to $347,724 during the three months ended June 30, 2020, an increase of $204,252, or 59%. Cost of sales consists primarily of labor, depreciation, maintenance on lab equipment, and supplies consumed in our testing operations. The increased cost of sales in the current period was primarily due to our increased labor and outsourced testing fees incurred during the current period. Our gross margins were approximately 28% during the three months ended June 30, 2021, compared to 15% during the three months ended June 30, 2020, which translated to $152,534 of increased gross profit from our $356,786 of increased revenues received in the current period. Our margins increased in the current period due to the increase in revenues, which increased at a greater rate than our labor costs and equipment servicing costs.

Generaland Administrative Expenses

General and administrative expenses for the three months ended June 30, 2021 were $278,082, compared to $328,128 during the three months ended June 30, 2020, a decrease of $50,046, or 15%. The expenses consisted primarily of marketing, rent, salaries and wages, and travel expenses. General and administrative expenses included non-cash, stock-based compensation of $16,952 and $33,976 during the three months ended June 30, 2021 and 2020, respectively. General and administrative expenses decreased primarily due to decreased corporate overhead activities and the discontinuation of rents on warehouse space that we were previously subleasing.

ProfessionalFees

Professional fees for the three months ended June 30, 2021 were $91,001, compared to $177,835 during the three months ended June 30, 2020, a decrease of $86,834, or 49%. Professional fees included non-cash, stock-based compensation of $90,190 and $54,749 during the three months ended June 30, 2021 and 2020, respectively. Professional fees decreased primarily due to decreased corporate consulting services during the current period as we focused primarily on the lab operations during the current period.

Changein Allowance for Doubtful Accounts

Our change in allowance for doubtful accounts for the three months ended June 30, 2021 resulted in $10,960 of income, compared to $25,420 of expense during the three months ended June 30, 2020, an improvement of $36,380, or 143%. Our change in allowance for doubtful accounts improved during the current period primarily as our allowance for doubtful accounts decreased from $110,147 to $96,282 during the quarter, as the Nevada tourism market began to open up again and our customers’ cash flows improved.

OperatingLoss

Our operating loss for the three months ended June 30, 2021 was $146,084, compared to an operating loss of $471,878 during the three months ended June 30, 2020, a decrease of $325,794, or 69%. Our operating loss decreased primarily due to our increased gross profit, as tourism returned in Nevada after we navigated through the height of the effects of the COVID-19 coronavirus pandemic during the comparative period, as we continued to pare our general and administrative and professional fee costs, and decreased our allowance for doubtful accounts and overhead cost saving measures we implemented in response to Covid-19 that we initiated in the three months ended June 30, 2020.

OtherIncome (Expense)

Other expense, on a net basis, for the three months ended June 30, 2021 was $31,130, compared to other expense, on a net basis, of $48,809 during the three months ended June 30, 2020, a net decrease of $17,679. Other expense consisted of interest expense of $31,130 for the three months ended June 30, 2021. Other expense consisted of $41,571 of interest expense and a loss of $28,238 on the disposal of fixed assets, as partially offset by other income, consisting of $21,000 of subleased rental income for the three months ended June 30, 2020.

NetLoss

Net loss for the three months ended June 30, 2021 was $177,214, compared to a net loss of $520,687 during the three months ended June 30, 2020, a decrease of $343,473, or 66%. The decreased net loss was primarily due to our increased revenues, as the returning tourism in Nevada improved, compared to the prior period when we navigated through the height of the effects of the COVID-19 coronavirus pandemic.

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Resultsof Operations for the Nine Months Ended June 30, 2021 and 2020:

The following table summarizes selected items from the statement of operations for the nine months ended June 30, 2021 and 2020.

	Nine Months<br> Ended June 30,						Increase /
	2021			2020			(Decrease)
Revenues	$	1,897,560		$	1,971,141		$	(73,581	)
Cost of sales		1,389,776			1,250,234			139,542
Gross<br> profit		507,784			720,907			(213,123	)
Operating expenses:
General<br> and administrative		715,093			1,123,479			(408,386	)
Professional<br> fees		313,364			688,902			(375,538	)
Change<br> in allowance for doubtful accounts		(28,945	)		186,540			(215,485	)
Total<br> operating expenses:		999,512			1,998,921			(999,409	)
Operating loss		(491,728	)		(1,278,014	)		(786,286	)
Total<br> other income (expense)		(57,922	)		(72,243	)		(14,321	)
Net loss	$	(549,650	)	$	(1,350,257	)	$	(800,607	)

Revenues

Aggregate revenues for the nine months ended June 30, 2021 were $1,897,560, compared to revenues of $1,971,141 during the nine months ended June 30, 2020, a decrease of $73,581, or 4%. The decrease in revenue was due to the impact the COVID-19 coronavirus pandemic had on the tourism industry in Nevada during the current period.

Costof Sales

Cost of sales for the nine months ended June 30, 2021 were $1,389,776, compared to $1,250,234 during the nine months ended June 30, 2020, an increase of $139,542, or 11%. Cost of sales consist primarily of labor, depreciation, maintenance on lab equipment, and supplies consumed in our testing operations. The increased cost of sales in the current period was primarily due to our increased labor and outsourced testing fees incurred during the current period. Our gross margins of approximately 27% and 37% during the nine months ended June 30, 2021 and 2020, respectively, translated to $213,123 of decreased gross profit in the current period. Our margins in the nine months ended June 30, 2021 were significantly affected by the decline in revenues, and our inability to reduce labor costs and decrease our equipment servicing costs, in addition to having to outsource a portion of our testing services.

Generaland Administrative Expenses

General and administrative expenses for the nine months ended June 30, 2021 were $715,093, compared to $1,123,479 during the nine months ended June 30, 2020, a decrease of $408,386, or 36%. The expenses consisted primarily of marketing, rent, salaries and wages, and travel expenses. General and administrative expenses included non-cash, stock-based compensation of $50,856 and $72,060 during the nine months ended June 30, 2021 and 2020, respectively. General and administrative expenses decreased due primarily to decreased corporate overhead activities and the discontinuation of rents on warehouse space that we were previously subleasing.

ProfessionalFees

Professional fees for the nine months ended June 30, 2021 were $313,364, compared to $688,902 during the nine months ended June 30, 2020, a decrease of $375,538, or 55%. Professional fees included non-cash, stock-based compensation of $187,267 and $179,678 during the nine months ended June 30, 2021 and 2020, respectively. Professional fees decreased primarily due to decreased corporate consulting and legal services during the current period as we focused primarily on the lab operations during the current period.

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Changein Allowance for Doubtful Accounts

Our change in allowance for doubtful accounts resulted in $28,945 of income for the nine months ended June 30, 2021, compared to $186,540 of expense during the nine months ended June 30, 2020, an improvement of $215,485, or 116%. Our change in allowance for doubtful accounts improved during the current period primarily as our allowance for doubtful accounts decreased from $128,132 to $96,282 during the period, as the Nevada tourism market began to open up again and our customers’ cash flows improved.

OperatingLoss

Our operating loss for the nine months ended June 30, 2021 was $491,728, compared to $1,278,014 during the nine months ended June 30, 2020, a decrease of $999,409, or 50%. Our operating loss decreased primarily due to our decreased general and administrative expenses and professional fees, which in part reflect overhead cost saving measures we implemented in response to Covid-19, and improvements in the collection of our accounts receivable that reduced our change in allowance for doubtful accounts by $215,485, that were not reflected in the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020.

OtherIncome (Expense)

Other expense, on a net basis, for the nine months ended June 30, 2021 was $57,922, compared to other expense, on a net basis, of $72,243 during the nine months ended June 30, 2020, a net decrease of $14,321. Other expense consisted of $105,840 of interest expense, as offset by a gain on early extinguishment of debt in the amount of $40,338 and a gain on the distribution of $7,580 of previously impaired inventory to our former CEO, compared to $107,005 of interest expense and a loss of $28,238 on the disposal of fixed assets, as offset by $63,000 of sublet rental income, during the nine months ended June 30, 2020.

NetLoss

Net loss for the nine months ended June 30, 2021 was $549,650, compared to $1,350,257 during the nine months ended June 30, 2020, an improvement of $800,607, or 59%. The decreased net loss was due primarily to overhead cost savings, as offset in part by reduced sales and diminished profit margins, as we focused all of our efforts on operating the lab due to the effects of Covid-19, as described above, during the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020.

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Liquidityand Capital Resources

The following is a summary of the Company’s cash flows provided by (used in) operating, investing, and financing activities for the nine-month periods ended June 30, 2021 and 2020:

	2021			2020
Operating Activities	$	(139,096	)	$	(614,937	)
Investing Activities		(1,206	)		(341,008	)
Financing Activities		130,362			759,068
Net Decrease<br> in Cash	$	(9,940	)	$	(196,877	)

Net Cash Used in Operating Activities

During the nine months ended June 30, 2021, net cash used in operating activities was $139,096, compared to net cash used in operating activities of $614,937 for the same period ended June 30, 2020. The decrease in cash used in operating activities was primarily attributable to our decreased net loss.

Net Cash Used in Investing Activities

During the nine months ended June 30, 2021, net cash used in investing activities was $1,206, compared to $341,008 for the same period ended June 30, 2020. The decrease is attributable to fewer investments made for cannabis testing equipment in the current period, and the $200,000 purchase of VSSL Enterprises, Ltd. in the prior period.

Net Cash Provided by Financing Activities

During the nine months ended June 30, 2021, net cash provided by financing activities was $130,362, compared to net cash provided by financing activities of $759,068 for the same period ended June 30, 2020. The current period consisted primarily of $175,000 of proceeds received on debt financing, proceeds of $20,250 from the sale of stock, as offset by $24,443 of principal payments on an equipment lease and $40,445 of principal payments on an equipment loan, compared to $770,034 of net proceeds received on debt financing and proceeds of $56,500 from the sale of stock, as offset by $41,824 of principal payments on an equipment lease and $25,642 of principal payments on an equipment loan in the comparative period.

Abilityto Continue as a Going Concern

As of June 30, 2021, our balance of cash on hand was $72,809, and we had negative working capital of $417,788 and an accumulated recurring losses of $17,814,800. We currently may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations and expand our lab testing business. As we continue to develop our lab testing business and attempt to expand operational activities, we expect to experience net negative cash flows from operations in amounts not now determinable, and will be required to obtain additional financing to fund operations through common stock offerings to the extent necessary to provide working capital. We have and expect to continue to have substantial capital expenditure and working capital needs.

The Company has incurred recurring losses from operations resulting in an accumulated deficit, and, as set forth above, the Company’s cash on hand is not sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new customers to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. In the event sales do not materialize at the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing our business without either a temporary interruption or a permanent cessation. In addition, additional financing may result in substantial dilution to existing stockholders.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Off-BalanceSheet Arrangements

We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.

CriticalAccounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management’s subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.

While our significant accounting policies are more fully described in notes to our consolidated financial statements appearing elsewhere in this Form 10-Q, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we used in the preparation of our financial statements.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of lab testing services through our subsidiary Digipath Labs, Inc.

Revenue is primarily generated through our subsidiary, Digipath Labs, Inc., which recognizes revenue from the analytical testing of cannabis products for licensed producers and cultivators within the state of Nevada on a determinable fixed fee per test, or panel of tests basis. Revenue from the performance of those services is recognized upon completion of the tests, at which time test results are delivered to the customer, provided collectability of the fee is reasonably assured. We typically require payment within thirty days of the delivery of results. Management estimates an allowance for doubtful accounts based on the aging of its receivables.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 (ASC 2018-07). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

ITEM

3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item

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ITEM

4. CONTROLS AND PROCEDURES.

DisclosureControls and Procedures

Our management, with the participation of our President and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our President and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changesin Internal Control over Financial Reporting

There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that occurred during the period of our evaluation or subsequent to the date we carried out our evaluation which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any system of controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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PART

II - OTHER INFORMATION

ITEM

1. LEGAL PROCEEDINGS.

We are not a party to any legal or administrative proceedings that we believe, individually or in the aggregate, would be likely to have a material adverse effect on our financial condition or results of operations.

ITEM

1A. RISK FACTORS.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item

ITEM

2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following issuances of equity securities by the Company were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933 during the three-month period ended June 30, 2021:

Common Stock Issued for Services

On June 25, 2021, we issued an aggregate 375,000 shares of common stock, restricted in accordance with Rule 144, to two of our directors as payment in lieu of cash for services rendered.

On June 25, 2021, we issued 83,333 shares of common stock, restricted in accordance with Rule 144, to a former director as payment in lieu of cash for services rendered.

On June 25, 2021, we issued 250,000 shares of common stock, restricted in accordance with Rule 144, to our former CFO for services rendered pursuant to his employment agreement.

On June 2, 2021, we issued 840,000 shares of common stock, restricted in accordance with Rule 144, to one of our directors as payment in lieu of cash for settlement of services rendered.

ITEM

3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM

4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM

5. OTHER INFORMATION.

None.

ITEM

6. EXHIBITS.

   28
   Exhibit	Description
   ---	---
   2.1	Stock Purchase Agreement between Digipath, Inc., VSSL Enterprises Ltd., Kyle Joseph Remenda, Philippe Olivier Henry, PhD, Audim Ventures Ltd. and Britt Ash Enterprises Ltd., dated March 9, 2020 (incorporated by reference to Exhibit 2.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on March 16, 2020)
   3.1	Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Form 10 filed with the Securities and Exchange Commission by Digipath, Inc. on July 15, 2011)
   3.2	Bylaws (incorporated by reference to Exhibit 3.2 of the Form 10 filed with the Securities and Exchange Commission by Digipath, Inc. on July 15, 2011)
   3.3	Certificate of Amendment to Articles of Incorporation dated April 4, 2014 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on April 10, 2014)
   3.4	Certificate of Designations, Preferences, Limitations, Restrictions and Relative Rights of Series A Convertible Preferred Stock dated April 9, 2014 (incorporated by reference to Exhibit 3.2 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on April 10, 2014)
   3.5	Certificate of Amendment to Articles of Incorporation dated May 22, 2015 (incorporated by reference to Exhibit 3.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on May 26, 2015)
   3.6	Certificate of Amendment to Articles of Incorporation dated May 14, 2019 (incorporated by reference to Exhibit 3.6 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on August 13, 2019)
   4.1	Form of 8% Senior Secured Convertible Notes due December 31, 2020 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on November 21, 2018)
   4.2	Form of 8% Senior Secured Convertible Notes due September 23, 2020 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on September 26, 2019)
   4.3	9% Secured Convertible Note, between Digipath, Inc. and holder, due August 10, 2022 (incorporated by reference to Exhibit 4.3 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on February 14, 2020)
   4.4	9% Secured Subordinated Convertible Note, between Digipath, Inc. and holder, due August 11, 2022 (incorporated by reference to Exhibit 4.4 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on February 14, 2020)
   4.5	9% Secured Subordinated Convertible Note, between Digipath, Inc. and holder, due August 11, 2022 (incorporated by reference to Exhibit 4.5 of the Current Report on Form 10-Q filed with the Securities and Exchange Commission by Digipath, Inc. on May 15, 2020)
   4.6	Form of Amendment to 9% Secured Convertible Note, between Digipath, Inc. and holder, due August 10, 2022 (incorporated by reference to Exhibit 4.1 of the Report on Form 8-K filed with the Securities and Exchange Commission by Digipath, Inc. on January 6, 2021)
   31.1*	Section<br> 302 Certification of Principal Executive Officer
   31.2*	Section<br> 302 Certification of Principal Financial Officer
   32.1*	Section<br> 906 Certification of Principal Executive Officer
   32.2*	Section<br> 906 Certification of Principal Financial Officer
   101.INS*	XBRL<br> Instance Document
   101.SCH*	XBRL<br> Schema Document
   101.CAL*	XBRL<br> Calculation Linkbase Document
   101.DEF*	XBRL<br> Definition Linkbase Document
   101.LAB*	XBRL<br> Labels Linkbase Document
   101.PRE*	XBRL<br> Presentation Linkbase Document

* Filed herewith.

| 29 |

| --- |

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 16, 2021

DIGIPATH, INC.
By:	/s/ Todd Denkin
Name:	Todd Denkin
Title:	President
By:	/s/ A. Stone Douglass
Name:	A. Stone Douglass
Title:	Chief Financial Officer

| 30 |

| --- |

EXHIBIT31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Todd Denkin, certify that:

1.       I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2021 of Digipath, Inc.;

2.	Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or<br> omit to state a material fact necessary to make the statements made, in light of the circumstances<br> under which such statements were made, not misleading with respect to the period covered<br> by this report;
3.	Based<br> on my knowledge, the financial statements, and other financial information included in this<br> report, fairly present in all material respects the financial condition, results of operations<br> and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The<br> registrant’s other certifying officer(s) and I are responsible for establishing and<br> maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)<br> and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act<br> Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
a.	Designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures<br> to be designed under our supervision, to ensure that material information relating to the<br> registrant, is made known to us by others within those entities, particularly during the<br> period in which this report is being prepared;
---	---
b.	Designed<br> such internal control over financial reporting, or caused such internal control over financial<br> reporting to be designed under our supervision, to provide reasonable assurance regarding<br> the reliability of financial reporting and the preparation of financial statements for external<br> purposes in accordance with generally accepted accounting principles;
---	---
c.	Evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented<br> in this report our conclusions about the effectiveness of the disclosure controls and procedures,<br> as of the end of the period covered by this report based on such evaluation; and
---	---
d.	Disclosed<br> in this report any change in the registrant’s internal control over financial reporting<br> that occurred during the registrant’s most recent fiscal quarter (the registrant’s<br> fourth fiscal quarter in the case of an annual report) that has materially affected, or is<br> reasonably likely to materially affect, the registrant’s internal control over financial<br> reporting.
---	---
5.	The<br> registrant’s other certifying officer(s) and I have disclosed, based on our most recent<br> evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing<br> the equivalent functions):
---	---
a.	All<br> significant deficiencies and material weaknesses in the design or operation of internal control<br> over financial reporting which are reasonably likely to adversely affect the registrant’s<br> ability to record, process, summarize and report financial information; and
---	---
b.	Any<br> fraud, whether or not material, that involves management or other employees who have a significant<br> role in the small business issuer’s internal control over financial reporting.
---	---

Dated: August 16, 2021

/s/ Todd Denkin
Todd Denkin, President
(Principal<br> Executive Officer)

EXHIBIT31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, A. Stone Douglass, certify that:

1.       I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2021 of Digipath, Inc.;

2.	Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or<br> omit to state a material fact necessary to make the statements made, in light of the circumstances<br> under which such statements were made, not misleading with respect to the period covered<br> by this report;
3.	Based<br> on my knowledge, the financial statements, and other financial information included in this<br> report, fairly present in all material respects the financial condition, results of operations<br> and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The<br> registrant’s other certifying officer(s) and I are responsible for establishing and<br> maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)<br> and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act<br> Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
a.	Designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures<br> to be designed under our supervision, to ensure that material information relating to the<br> registrant, is made known to us by others within those entities, particularly during the<br> period in which this report is being prepared;
---	---
b.	Designed<br> such internal control over financial reporting, or caused such internal control over financial<br> reporting to be designed under our supervision, to provide reasonable assurance regarding<br> the reliability of financial reporting and the preparation of financial statements for external<br> purposes in accordance with generally accepted accounting principles;
---	---
c.	Evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented<br> in this report our conclusions about the effectiveness of the disclosure controls and procedures,<br> as of the end of the period covered by this report based on such evaluation; and
---	---
d.	Disclosed<br> in this report any change in the registrant’s internal control over financial reporting<br> that occurred during the registrant’s most recent fiscal quarter (the registrant’s<br> fourth fiscal quarter in the case of an annual report) that has materially affected, or is<br> reasonably likely to materially affect, the registrant’s internal control over financial<br> reporting.
---	---
5.	The<br> registrant’s other certifying officer(s) and I have disclosed, based on our most recent<br> evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing<br> the equivalent functions):
---	---
a.	All<br> significant deficiencies and material weaknesses in the design or operation of internal control<br> over financial reporting which are reasonably likely to adversely affect the registrant’s<br> ability to record, process, summarize and report financial information; and
---	---
b.	Any<br> fraud, whether or not material, that involves management or other employees who have a significant<br> role in the small business issuer’s internal control over financial reporting.
---	---

Date: August 16, 2021

/s/ A. Stone Douglass
A. Stone Douglass, Chief Financial Officer
(Principal<br> Financial Officer)

Exhibit32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Digipath, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021 (the “Report”) I, Todd Denkin, President of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1)	The<br> Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange<br> Act of 1934; and
(2)	The<br> information contained in the Report fairly presents, in all material respects, the financial<br> condition and results of operations of the Company.
---	---

Dated: August 16, 2021

/s/ Todd Denkin
Todd<br> Denkin, President<br><br> <br>(Principal<br> Executive Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Digipath, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021 (the “Report”) I, A. Stone Douglass, Chief Financial Officer of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1)	The<br> Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange<br> Act of 1934; and
(2)	The<br> information contained in the Report fairly presents, in all material respects, the financial<br> condition and results of operations of the Company.
---	---

Dated: August 16, 2021

/s/ A. Stone Douglass
A. Stone Douglass, Chief Financial Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.